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As inflation declines, the I-bond trades that were popular over the past few years are no longer as attractive.
Yahoo Finance’s Kerry Hannon reports:
I purchased the I It’s a good time to sell bonds.
These high annual rates have since subsided as inflation has subsided, and the I-bonds scraped together during those hectic days now pay about a third of that tempting rate, or 3.97%.
Here’s why: I The bond interest rate consists of a fixed interest rate that applies over the 30-year life of the bond and a variable semi-annual inflation rate calculated from six-month changes in the consumer price index.
The latest I bond annualized yield is 5.27%. This is a high fixed rate of 1.30%, plus a variable rate of 3.97% that resets again in May.
In contrast, the I-bond fixed rate was 0% in November 2021 and May 2022, when inflation was soaring. This means that the old bond is now earning a current variable interest rate and term.
What about take-home? Redeem and reinvest.
“I personally sell my products and advise my clients to do the same,” says Daniel Howard, a certified financial planner with Wealth by Design in Glenwood Springs, Colorado. ” he told Yahoo Finance. “Depending on individual cash flow considerations, we are considering money markets, ladder CDs, and corporate bond bullets.”
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